The fund’s NAV rose by 7.81 per cent in February

The NAV of LHV Persian Gulf Fund gained 7.81 percent during February. This represented the best monthly return for the fund in the last 23 months and the fourth best monthly performance ever for the fund. Main reasons for such a burst of optimism were positive news coming from the euro zone, a steadily rising oil price and slightly oversold stock markets in the GCC that did not participate in the global stock market rally in January.

Another positive development that we must mention is the possible opening up for foreigners to invest directly in the Saudi Arabian stock markets. The Saudi Arabian stock market (Tadawul) is by far the largest in the Middle East region with a daily turnover of approximately 1 billion USD. Another trigger for the rally was also the growing expectation that MSCI could upgrade UAE from frontier market status to emerging market status this summer. So far in 2012 the Dubai market has been in euro terms among the best 10 stock markets in the world.

Valuations of a number of listed equities have reached very attractive levels and in February we decided to add more risk to the fund portfolio by increasing our exposure in real estate sector. For instance we increased Sorouh Real Estate Company’s (UAE) exposure from 1.7 per cent in the beginning of the month to 4.5 per cent by the end of the month of total assets. The investment did very well in February as it gained 46.4 per cent during the month. Other top gainers in the fund during the month were Dana Gas +30 per cent, Aldar Properties +28.7 per cent and First Gulf Bank +17.5 per cent (all UAE).

Mikael Kvibäck and Joel Kukemelk